PROBLEM (7) A consumer with I dollars budget has the utility u(x,y) = x(y+1) over amounts of cake (x) and ice cream (y) she consumes. The prices are px, py respectively. (a) Derive her demand for cake (x), as a function of prices p., py and her budget I. (b) Looking at the demand function in (a), is cake a normal good or an inferior good? Are cake and ice cream complements or substitutes? (c) Calculate the (i) (own) price, (ii) income, (iii) cross-price elasticity of demand for cake at the point where I = 80, px=10, py=20..

PROBLEM (7) A consumer with I dollars budget has the utility u(x,y) = x(y+1) over amounts of cake (x) and ice cream (y) she consumes. The prices are px, py respectively. (a) Derive her demand for cake (x), as a function of prices p., py and her budget I. (b) Looking at the demand function in (a), is cake a normal good or an inferior good? Are cake and ice cream complements or substitutes? (c) Calculate the (i) (own) price, (ii) income, (iii) cross-price elasticity of demand for cake at the point where I = 80, px=10, py=20..

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics

Section: Chapter Questions

Problem 6QP

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A consumer with I dollars budget has the utility u(x,y) = x(y+1) over amounts of cake (x) and ice cream (y) she consumes. The prices are px , py respectively. (a) Derive her demand for cake (x), as a function of prices px , py and her budget I. (b) Looking at the demand function in (a), is cake a normal good or an inferior good? Are cake and ice cream complements or substitutes? (c) Calculate the (i) (own) price, (ii) income, (iii) cross- price elasticity of demand for cake at the point where I = 80, px =10, py = 20.
PROBLEM (5) A consumer with I dollars budget has the utility u(x,y) = x(y+1) over amounts of cake (x) and ice cream (y) she consumes. The prices are px , py respectively. (a) Derive her demand for cake (x), as a function of prices px , py and her budget I.(b) Looking at the demand function in (a), is cake a normal good or an inferior good? Are cake and ice cream complements or substitutes?(c) Calculate the (i) (own) price, (ii) income, (iii) cross- price elasticity of demand for cake at the point whereI = 80, px =10, py = 20..
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